4.5.1 Creating knowledge in the company

Nonaka et al. (1996) suggested that knowledge is created in organisations by a process that amplifies the knowledge created by individuals and crystallises it as part of the knowledge system of the organisation. It is hoped that it would not crystallise into a museum piece but act as a dynamic force to move the knowledge system to both encompass wider multidisciplinary knowledge and more detailed explicit knowledge of the present technology. Knowledge can be created within the product development team, the company, and by interaction with the external environment between individuals and groups. This interaction can be between tacit and explicit knowledge, and can cause conversion of knowledge as shown in Table 4.8.


Table 4.8 Knowledge conversion

Knowledge conversion Place in product development People, group Tacit to tacit Brainstorming, focus groups, discussion, concepts comparison Consumer/designer Consumer/market researcher Designer/market researcher/process developer Tacit to explicit Product concept creation, product design specifications, modelling, feasibility reports, evaluation reports, production plan, market strategy Consumer/designer Designer/process developer Development team/ functional depts/ management Explicit to explicit Business strategy/product development strategy, unit operations/new process, measures/testing techniques Management/ product developers Engineers/ developers Quality assurance/ designer/developer Explicit to tacit Raw material specifications/ use in product, basic science/technology, reported experience/new problem, product problem/research for solution, product development project report/tacit model for organising future projects Supplier/developer Researcher/developer Files/developer Consumer/ designer/developer Reports/product development manager

The whole development from the product description to the product design specifications is a conversion of the tacit knowledge of consumers, market researchers and designers, by the development team to an explicit knowledge at a certain level. The design of the product and the process development then converts this often tacit description to a total product and process that can be described explicitly. Modelling is also a way of taking a tacit description of the product into an explicit description - the model can be verbal, physical, computer-based, or indeed mathematical. Explicit knowledge is exchanged in manuals, reports, papers, expert systems. Product design and production specifications, processing and quality assurance manuals, are commonly used for explicit knowledge transfers. It is important that the business, innovation and project development strategies, PD programmes and the aims and plans for individual projects are explicitly recorded for guidance of product development. Marketing can also be using point-of-sales data to develop their launch plan. The passing from stage to stage is often explicit going to explicit; for example the details of the product prototype going to the product specifications in production. It is important that this explicit knowledge is in a form that can be changed to tacit knowledge in a future project, projecting it with safety and confidence into a new area.

Organisational knowledge creation is a continuous and dynamic interaction between tacit and explicit knowledge (Nonaka et al., 1996), and between individuals and groups and also the company as a whole as shown in Fig. 4.10.

Fig. 4.10 Interaction of tacit and explicit knowledge in product strategy development.

In product development, the product development strategy develops from the business strategy, gradually increasing the tacit knowledge to explicit knowledge, until individuals form from this an explicit product strategy. Note that even here is tacit knowledge, which has to be communicated to the product development team. Creating a product strategy involves a community of interacting individuals with different knowledge and skills. They have started with the explicit knowledge in the business strategy, and with group discussions are alternately increasing the tacit knowledge and building up explicit knowledge. In developing the new product strategy, there is a need to use not only the traditional analysis and experience, but also to have the strategic imagination to turn the input into new strategic scenarios (Ellis, 1999). There is a need to look in new directions, develop strategies that are innovative, unexpected, original and effective. At least once a year, board and key executives and selected product developers/designers need to meet to develop ideas for strategies in what Ellis calls serious play. Then management needs to build aggregate project plans, and create the development strategy. To make these activities work, the people charged with their completion need to be educated in the fundamental principles. They also need to enhance their knowledge regularly of the organisation's market position, technologies, production processes, suppliers and competitors (Clark and Wheelwright, 1993). This process of knowledge building will be repeated in building up the product concept and the product design specifications. This time consumers will be included in the discussion groups with the product development team, marketing staff and technical staff. Product development teams move through these patterns of alternating periods of steady progress in knowledge creation, punctuated by sudden breakthroughs and sometimes changes in direction in the interacting periods. In creating knowledge, individual and group knowledge is interchanged, learning from each other, and then the combined knowledge for the problem is built. The combined knowledge then becomes the company knowledge in the future (Nonaka et al., 1996).

Some of the important factors in using knowledge in innovation identified in the 3M company are shown in Box 4.3.

Box 4.3 Important factors in innovation · Vision for product development which is understood and accepted by   management and the product development team, and is also related to   the customer. · Foresight which predicts the customers' articulated and unarticulated   needs. · Stretched goals, setting targets which cause the company to make a   quantum leap. · Empowerment, selecting the right people and then trust them enough to   let them have the initiative to work on their own. · Communications, the free exchange of information, staff understanding   that combining and transferring knowledge is as important as the initial   innovation. · Recognition of the importance of innovation as a discipline in all parts of   the company. Source: After Ellis, 1999.

All of these factors are related to knowledge, its communication and the empowerment of staff to use the knowledge. Perhaps the most important is the recognition that product development is a discipline with its own knowledge base. An important company capability in product development is having a thorough understanding of the market by acquiring, disseminating and using market information. But in many companies there are barriers to gaining market understanding, especially of new markets (Adams et al., 1998). In acquiring market information, people focus on either technology design aspects (here is a new product, do you want it?) or business aspects (here is a product, what are predictions of sales revenues?). They ignore product concept development with consumers, identifying target markets and their needs and wants, because the researchers think these are ambiguous. Dissemination of market information is hindered because people focus on their own goals, often departmental instead of the project goals. Cross-functional approaches are needed to give interactive communication so that the market information is incorporated in the product design and also in the development of the marketing strategy. The learning barriers of compartmentalised thinking are overcome by:

     developing common goals that are specific to the product, not to
        separate departments;

     clarifying each person's role in the product innovation activity so that
        each knows their part in the larger whole and can help one another;

     learning to appreciate both the contributions from, and the constraints, in
        the various departments.

In knowledge use, the effort is to try to overcome the inertia to change. People tend to proceed as they always have, maintaining the status quo rather than adjusting actions to capitalise on market learning. Especially with incremental products, it is assumed that the product is just like the present products and there is no need for extensive market research; sometimes the research is done but ignored because it does not fit with preconceived ideas. Managers should enable teams to develop market data. Managers also must help people to extend the usual routines into new practices and promote trust between themselves and the team members, and also within the team. The product developers can make their product familiar to the manager by providing useful information about the product and its market. 'Useful' means that the managers could use the information to follow the development effort and evaluate the product's potential.

An important factor in the product development group is connectivity. People at one time worked in close-knit departments or teams where knowledge would be shared and exchanged routinely and easily. But today there is the problem of not only maintaining contact in a large building but maintaining contact internationally. The product development project team may have no physical contact and often work for different managers, and they may have never met - their only contact is by e-mail (Ellis, 1999). It has been shown that trust in team orientation, that is team members having reciprocal faith in others' intentions and behaviour to work towards team goals, rather than narrow, individual or functional goals or agendas, is essential. As well, trust in team members' competence is important - that they are competent to handle the complex and unknown problems that can occur (Madhaven and Grover, 1998). How does one trust someone through e-mail, far less work cooperatively with them when you have no idea of their knowledge, skills and personality? There needs to be recognition of the team and members do need to meet - not just for the one-day quick meeting but to work together on part of the problem, over several days and weeks. Team members who are able to interact face-to-face will be more effective and efficient at creating new knowledge. Management needs to understand that there are costs in running international product development teams if they are to be effective and efficient - both in having operational, interactive networks and also in having joint working times. Fostering an environment where people share information and knowledge because they know they will get appropriate credit for it, is an extremely important way to create intellectual capital within a company and keep it there.

The company needs to create an environment where individuals are encouraged to preserve and grow their own knowledge, and where they have the mechanism to develop personal relationships so that they share this knowledge with others in an informal interaction. They need to be encouraged to take risks together, and to actively seek knowledge to decrease the risks. The relationships should not be static but should be moving like a kaleidoscope to form new patterns of relationships and new groupings but with basically the same people. People will be lost from product development teams but, if they are properly run, not too often and not the ones who have high knowledge and/or the greatest ability in creating knowledge.